In recent years, an increasing number of investors have taken direct control of their personal investments. One reason for this trend is technology advances that make it easy for investors to manage their own accounts, often making it more convenient and less expensive than relying on financial intermediaries. However, individual investors often are not as knowledgeable or experienced as professional investors; therefore, their trades often do not result in the same level of profit as those of professional investors. If an investment company were able to use the money invested by individual investors to make investments of the company's choosing, instead of those of the individuals' choosing, it is likely that the company, in the aggregate, would outperform the individual investors. In that case, after paying to the individuals the value of their selected investments, the difference between the performance of the company's investments and the performance of the individuals' investments would be profit for the investment company.
In order for such a system to work, the individual investors would need incentive to allow the money they planned to invest to be used for investment by the investment company, as the individuals would not reap the benefit if the investments of the company did in fact prove to be more profitable. Such incentive could come in the form of a rebate. For instance, a rebate could offset a portion of any losses of the investments chosen by the individuals. In that case, the individuals would receive the full benefits of their chose trades but their losses would be reduced. A rebate could also be calculated based on the amount of money invested by an individual, the length of time the money was invested by the individual, the performance of the investments selected by the individual, or the performance of the investments made by the company. Another form of incentive could be to not charge customers transaction fees for their selected investments or to pay customers a fee for each investment they select.
From the perspective of customers, it would be as if they had actually invested in their chosen securities, with the bonus of any incentives provided by the company. From the perspective of the investment company, the individuals would be supplying a source of capital for investment in any way the investment company saw fit.
Virtual online trading systems are known. For example, U.S. Pat. No. 6,773,350 relates to a virtual trading system based on real data; no actual trades are made. Furthermore, actual online trading systems are known. For example, U.S. patent application Ser. No. 09/825,714 relates to a method for minors to make stock market transactions via the internet. However, none of the references enable individual investors to actually realize the gains and losses of their chosen investments while allowing an investment company access to the funds invested by individuals to make investments of the company's choosing.
Thus, it is an object of the present invention to provide methods and systems for allowing individual investors to select investments. Another object is to allow an investment company to have access to the money invested by individual investors, which will be invested as the company sees fit. Yet another object is to encourage individual investors to participate in the methods and systems of the present invention by allowing the individuals to realize the full gains and losses of their chosen investments while providing incentives, such as rebates or a desirable transaction fee scheme.